Friday, June 28, 2013

N.B. The following is research, not investment advice. You invest at your own risk, unlike the Wall Street banks, who also invest at your risk.

The Coppock curve is tracking downward.

The Coppock curve sends a long-term bottom signal when it turns up from a negative reading. Assuming the curve does not bounce up again—anything is possible but it has only bounced from this low before once, in 2012—how long until the next major market bottom? The mean number of months from a similar Coppock value ~67 to the next bottom (the signal in 2001 was the only false positive and is ignored, taking the second signal in 2002 as the true signal) was 11.6 months, with a max of 19 and a min of 5.

So the average expectation would be for a bottom in the summer of 2014, a very crude second degree polynomial fit to the the series of signal leads gives a lead time of ~8 months for a bottom in spring 2014, which has a certain harmonic resonance with the Seventies big bottom which was in March 1974.

By the way, long interest rates rose all the way up to the bottom in 1974—and beyond, of course. However, if the world economy hits an air pocket (failure of effective demand) we could see stock prices falling and further disinflation or deflation. Remember, the last ZIRP lasted from 1934 to 1946, a dozen years. It could be 2021 before short rates rise. It is really hard for me to imagine a scenario where inflation takes off except for isolated supply shocks in the current environment.

Pushing on a string seems to work for the stock market, if not the economy.

Wednesday, June 26, 2013

Running at about 70 percent of GDP, consumption has been above long-term averages for a while, with much of it financed by debt. Households are deleveraging where they can. Where will consumption go?

Of course, for the majority of consumers, the weakness in real disposable income has been greater than depicted because of the great degree of inequality in the income distribution. Government spending won’t pick up the slack, and neither will investment, from all appearances:

Robb has been posting a lot this month, with the Snowden disclosures. He shares my view that the nation state, while weakening, is entering a regime of “positive control” of the population that is roughly equivalent to neo-feudalism, a view I first expressed in 2009 in “On the coming neo-feudalism,” linked to by Yves at www.nakedcapitalism.com.

Unless the corporations, which are the dominant form of social organization on the planet, naturally adapt according to the principles suggested by Wilkinson et al.’s findings, i.e., that it will be optimal for them to flatten the income distribution within their structures as it will lead to lower health care costs as well as productivity improvements—if there is no natural countervailing movement toward greater equality of outcomes (and I am assuming here that the rich continue to “own” the politicians, so that no reform via taxation is possible), then we have the following probable sequence: neo-feudalism + “free market” capitalism + bought-and-paid-for government by the 1% + insatiable greed triggered by great wealth => immiseration of the proletariat and Marx’s revolution—with either true social reform following or a very bloody suppression indeed by the forces of “positive control” with a rinse and repeat cycle.

There certainly is the possibility of a dystopian future ahead. The passivity, and—I will say it—the lazy stupidity of the American people make it much more probable to happen. What can you do, if demonstrating in the streets is likely to get you sent to jail and the unemployment lines? Give money to progressive organizations that are reputable. Support local efforts to expose corrupt politicians.

The only person offering a solution to the larger “bootstrapping problem” of reforming American democracy that I can see is Lawrence Lessig, whose “money bomb” idea is as follows: raise X hundreds of millions of dollars from billionaires who are committed to reform and use it to secure the election of reformers to the House and Senate, whose charge is to push through legislation to get the money out of politics, or to vastly reduce its power. See Lessig with Bill Moyers.

Former Republican presidential candidate John Huntsman referred to the American campaign finance system as “an abomination.”

Sunday, June 16, 2013

I have added "Fabius Maximus" to my list. Since John Robb has turned his interest to his new site, "Resilient Communities", which is mostly about gardening, and stopped updating (much) his "Global Guerillas," I have turned to "Fabius Maximus" for incisive bashing of the greed and perversity of the military-industrial-financial-media complex from former ranking military intelligence insiders, who should know. There's a depth of content there, with plenty of back-links, so it's worth an extended visit.

Another site I've added is Michael Snyder's "Economic Collapse Blog," which provides nice sets of authoritative links within a fundy Christian rant that generally tries to tell people to prepare themselves for the collapse by buying some of the many products advertised on the site.

I was talking with a Washington insider in the health industry (who is "on the bus" and has benefited financially from Obamacare, which I support, once debugged) recently about the state of economy and got a dose of apparatchiki-speak. When I questioned the health of the economy, he said, "It's getting better! It's growing!"

I asked how an economy in which the vast majority of households' real incomes are declining could possibly be described as "getting better." He simply repeated his assertion.

Under continuous attack, the Democrats are becoming more and more rigid, brittle, and breakable--and willing to commit unethical uses of power to survive. I'm sure this is the Republican strategy.